General Home - Office Deduction Opportunities

        If you work out of your home, you're part of a growing trend. What's important to you, however, is that you may qualify for some valuable federal income tax deductions. You may be able to deduct part of your home's normal operating expenses for items such as utilities and insurance, you may be able to claim write-offs for depreciation or lease payments, depending on whether you own or rent, and you may even get some extra business car deductions. The tax-saving opportunities available to you will depend not only on the type of work you do at home, but where in the home you perform it.

        You won't get any home-office-type deductions unless you regularly and exclusively use a room or specific area in your home or apartment for business. So, for example, you don't get deductions if you work out of a room that your family also uses as a den. In addition, generally the office must either be the principal place of your business, or a place where you meet or deal with clients or customers.

        If you're a professional such as a doctor, dentist, or consultant who regularly meets with clients or patients in the home, you probably qualify for home-office deductions, but you may benefit from help on how best to allocate "shared" personal/ business expenses.

        If you don't meet with clients in your home office, qualifying for home office deductions usually still is no problem if your home is your only business location. However, the rules are more complicated if some aspects of your business are performed in the home, and others are performed outside the home. In this situation, there is a question as to whether or not the office is your principal place of business. Often, there is a fine line between qualifying and not qualifying. And the rules seem to change often. For example, starting in 1999, the home office deduction is allowed for those whose home office is the only place in which substantial administrative or management activities take place.

        If you're an employee who regularly comes home from the office with a loaded briefcase, catching up on paperwork at home won't do you any tax good. Employees qualify for home-office deductions only if they work at home for the convenience of their employer. So there are no deductions if you decide on your own to do office work during evenings and weekends, or work a couple of days a week at home because you'll get more done. And even if your employer requires you to work at home, you don't get any extra deductions unless you also get by the home-office hurdles.

        As you can see, working at home is anything but simple from the tax standpoint. We'll be happy to supply complete details on how the rules work in your situation, and how to make the most of them. If you need any help, don't hesitate to call. You should also call us if you're thinking of selling your combined home/office. With some advance tax planning, you may be able to minimize taxes on the transaction.

Copyright © 2003-2005 Cousins Accounting. All Rights Reserved

[Home] [Services] [Six Questions] [Contact Us] [Tax Notes] [Section 1] [Section 2] [Section 3] [Section 4] [Section 5] [Section 6] [Section 7] [Section 8] [Section 9] [Section 10] [Section 11] [Section 12] [Section 13] [Section 14] [Section 15] [Section 16] [Section 17] [Section 18] [Section 19] [Section 20] [Section 21] [Section 22] [Section 23] [Section 24] [Section 25] [Section 26] [Section 27] [Section 28] [Section 29] [Section 30] [Section 31] [Section 32] [Section 33] [Section 34] [Section 35] [Section 36] [Section 37] [Section 38] [Section 39] [Section 40] [Section 41] [Section 42] [Section 43] [Links]